SIC witness tells of fraud and waste in Marisco project

The Senate Investigative Committee heard sworn testimony last Thursday from Wallace P. Thompson, who shared with SIC members some of the “side shows” involving the $3 million allocated to the tug boat and barges project, whose costs have ballooned to just over $4 million and are expected to increase, given the ongoing associated lawsuit.

Thompson claimed that some task force members of the project “frauded $35,000 for that excavator” that was purchased for ASG using tax payers money.

Thompson’s company, Maritime Services, Inc. was contracted by Port Administration to assist with the operation of ASG vessels. Thompson himself was a consultant and advisor on the tug boat and barges project, which had been allocated $3 million from proceeds of the $20 million loan from the ASG Employees Retirement Fund.

The ASG Budget Office report on loan expenditures shows the project was allocated $3.2 million, but has an overage of just over $1 million, which triggered the SIC focus.

After he was sworn in, Thompson provided to the committee letters, memos and other information pertaining to the project as well as a copy of his deposition taken in Honolulu in the Marisco Ltd., civil action suit against ASG. The tugboat and barges project was sole sourced to Marisco, who had previously done work for ASG.

Sen. Fuata Dr. Iatala Tagiilima, who led the line of questioning, asked if there was any specific information included in the documents, that Thompson wanted to bring to the attention of the committee, who were going through the documents during the hearing.

“There were some side shows with this $3 million” allocated for the tugboat and barges project, said Thompson who noted that some of the information is included in his disposition. He said that once the Marisco lawsuit was filed, which was after ASG terminated his contract, the “governor’s office— I guess it was Tasi [Tuiteleleapaga]— had called Chris King [at Port Administration] and said ‘Chris when you meet with Captain Wally, can you ask him—where does he stand on the lawsuit?’.”

Recalling his conversation with King, he said, “I looked at Chris, I said ‘what’s the matter? What kind of remark it that? You guys terminated my 15 years of dedicated service to the Port and you’re asking me - where I stand on this lawsuit’?”

“I told him (Chris), it’s called ethics. Ethics. I’m going to tell the whole truth and nothing but the truth.”

“And I’m going to name names. I have nothing to hide. I went as far as to the FBI. Sad to say that some of the task force members frauded $35,000 for that excavator,” he said but didn’t provide specific details.

Thompson said he conducted his own investigation into the excavator used by a company in Honolulu. He said an official with the company (which was not Marisco) showed him a copy of the check made out to an individual from the task force. “I asked what was this for, and I was told that it was for use of the excavator that was sitting at Marisco,” he told SIC, adding “You know, it’s wrong. That’s our taxpayer’s money. It’s wrong.”

(Samoa News understands that Thompson’s deposition in the Marisco lawsuit includes the name of the individual involved in the excavator which had been leased to the Honolulu company.)

He explained that a task force for this project had been created, which included himself, Port Administration director Matagi Ray McMoore, Port official Fanene So’oto and Terry Conden, a marine engineer and surveyor for Port Administration.

Thompson, a former territorial lawmaker, explained that Marisco was chosen due to its close proximity to American Samoa. He said there was a memo from the Governor’s Office to look at tugboats in New Zealand, which are foreign flagged and would need to be checked and certified by the U.S. Coast Guard.

Thompson said they were able to find a tugboat and two Navy barges for purchase in Honolulu which they could present to Marisco for refurbishing and rebuilding before being sent to the territory. He said Marisco had previously done work for ASG such as refurbishing the tugboat Tatoso II and upgrading the MV Sili.

He said the tugboat Sailele was purchased from another Hawai’i based company at $500,000 and was completely refurbished in accordance with U.S. Coast Guard compliance. He says the refurbishment at Marisco was estimated to cost around $300,000.

He said Marisco did a “fantastic job” in refurbishing and refitting the Sailele but he didn’t deliver the Sailele back to American Samoa because his contract had been terminated.

“So they hired another captain to sail the boat down” and according to Thompson, the captain for that journey didn’t have an international ocean endorsement to sail the boat.

Later in the hearing, Thompson told the committee the individual who sailed the boat down was only licensed to captain a vessel 200 miles out, but not a journey of more than 2,000 miles to American Samoa.

Fuata asked if Marisco had been told that the tugboat refurbishment had a limited budget, and if there were any overcharges made by Marisco in their invoices to ASG.

Thompson explained that ASG, as a customer, puts together a list of all the things that need to be done, and Marisco would then apply the dollar amount of each service, and would give ASG a price quote for the project.

As for any over-charge or errors in Marisco billing, Thompson said, “In my expert opinion, what Marisco did was a professional job.” He pointed out that the problem with the print-out of the expenses was that a lot of these expenses had not been earmarked for the project.

“A lot of it was for the MV Sili, the MV Manu’atele and other requests by ASG,” said Thompson who has been a master mariner for 35 years. Additionally there were expenses for the barges as well as about $400,000 in expenses for the excavator that is now sitting at the ASG shipyard.

He said other expenses, which were for the MV Sili, were air freight back to the territory, as well as costs associated with the Marisco federal lawsuit case.

Fuata asked about the overrun in the project and Thompson gave an example of what he described as a “waste of money” adding, “ but I tend to put the blame on our people— on the task force.”

“For any tug boat to get out of the harbor, you have to have a load line —which is a marking on the side of the boat. You can only load the boat so much, because if you load it a little bit more, it’s going to sink. It affects the stability of the vessel. A load line is a Coast Guard regulation,” he explained.

So when ASG purchased the Sailele, which originally had a load line, ASG didn’t follow up until it was time for inspection by the Coast Guard, who determined that the boat was not going anywhere until the load line was in place, he said.

“So it had to be rebuilt again, increasing expenses, because the boat has to meet Coast Guard specification,” he said.

He later mentioned that refitting the tug boat with a load line cost ASG an additional $100,000.

“So ASG told Marisco to go ahead and do it, not knowing that it was going to cost some money. And in the meantime, Marisco — thru its relationship with ASG all these years — went ahead with the changes, and (said) “we’ll bill you later.”

“And when they start sending the bill, I don’t think we had any money left over in the budget [for this project],” he said.

He said the big push at the time was to get the Sailele to the territory as there was no other ocean transport available for Manu’a, and ASG was forced to charter a vessel from Samoa. (The MV Sili was on dry dock at the time.)

He said another problem he found at the time was that Port Administration thought it was a good idea to use the barges for hauling freight to Manu’a once the barges arrived from Honolulu.

“And I was very outspoken to the Port director. I said ‘you can’t tow these barges to Manu’a, the harbors are too small’. And if you tow, a tow-line in there, you’re going to hang up the tow line in there. But my advice fell on deaf ears,” he said. “I’m just an advisor, I’m a consultant, I give reasons as to why I make these remarks.

“But then I was told ‘Wally you are no longer part of the advisory panel and are only going to be contracted to deliver the boats. So I came back here and worked on the MV Sili,” he said.